said on April 1st, 2010 categorized under: Tenants
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In today’s affordable housing market, many Twin Cities duplex owners are getting THAT call from tenants.
You know the one. It starts with, “I bought a house and am moving out”.
Somehow, those tenants often forget they signed a lease, which may still have time left to run.
At that point, the landlord should remind the residents they are legally obligated to pay the rent on the balance of their lease.
In all likelihood, this won’t have any impact.
The tenants leave, and the only option the duplex owner has is to pursue legal recourse, which tends to cost money.
However, what would happen if during the telephone conversation, the landlord suggested the tenants might remedy the situation by subletting or assigning the apartment.
What’s a sublet? Well, it’s a transfer of rights to the unit for a limited period of time. During that stretch, the original tenant is still responsible for the lease, rent payments, and may reserve the right to return.
How does that differ from assignment? In assigning the lease, the tenant turns over the responsibilities of the lease to the new resident, and absolves herself from any responsibility for or interest in the unit.
How does the landlord protect herself against the risks of an unknown tenant?
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The other day a seller received notice one of his tenants is moving out. As his property is on the market, he asked whether it was more advantageous to a sale for the unit to be vacant or full.
The answer is full.
But isn’t it easier to show the property with no one in it? Doesn’t it show better?
Yes.
However, the benefits of it being occupied far outweigh the consequences of a vacancy.
First, mortgage payments, taxes, insurance and utilities are all due whether the property is available for sale or not. As a result, it’s important the owner continue to generate revenue to cover those expenses.
Next, prospective buyers want to know not only that a property is appealing enough to attract tenants, but what the market value of that appeal is. If the rents are healthy, the property is a more desirable investment. The rents that are reflected on the MLS are therefore actual, not a fantasy concocted by the listing agent and seller.
Many buyers also like to know they are going to have a revenue-generating property the minute they take ownership. A 100 percent vacant duplex means a new owner has to scurry to fill two vacancies before the first mortgage payment comes due a month later.
What if a prospective owner wants to live in a tenant occupied unit? This takes some forethought, but if there’s a possibility you many sell your duplex some time in the future, it’s a good idea to have a clause in your lease stating the tenant agrees to vacate the property for an owner occupant provided they are given appropriate notice.
Of course, if your lease doesn’t have such a clause, you may need to visit with the residents to see if there’s an incentive that would entice them to move.
If they choose not to, the lease is a legally binding contract that both the seller and new buyer must honor.
